Introduction to financing adaptation

How financial institutions can support companies in adapting to climate change

SMEs have to face climate change and implement adaptation measures in order to remain competitive and to stay innovative. This generates an increasing demand from SMEs for financial products and services designed in accordance to their needs in times of climate change.

Mobilizing at-scale private finance for adaptation investment in developing countries is a key to building climate-resilient economies. Current flows, however, fall dramatically short of what is needed. Individual commercial actors thus have to design potential public policies or finance interventions to move adaptation forward and in order to establish adaptation finance for SMEs in developing countries.

Adaptation Finance: How to mobilize the Private Sector to contribute to resilience – Side event at COP23

The GIZ, together with the German Development Institute (DIE) and Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy, organized a side event at the COP23 on “Adaptation Finance: How to mobilize the Private Sector to contribute to resilience”.

At the interactive and lively session, experts from the private sector (Starbucks), the financial sector (KfW, Lightsmith Group) as well as academia (Frankfurt School) and civil society (ARCOS Rwanda) came together to discuss the role, demand and opportunities for private actors to finance adaptation in developing countries and emerging markets.

Some of the major learnings of the event include:

The private sector can contribute to building and financing resilience in different ways, such as through investments, innovation potential and risk management. In order to determine barriers, it is important to clarify which private actors are addressed (global companies, small- and medium-sized enterprises (SMEs), banks, institutional investors, foundations, etc.) and how.

A clear understanding of the need for adaptation and available adaptation measures is required to lay the basis for assessing the financing demand. Experiences of adaptation measures and finance already exist and need to be analyzed in order to put adaptation-financing streams to work.

Climate finance instruments for adaptation are growing in scale. They can provide financial incentives (de-risking through blending, grants, concessional loans, etc.) or/and technical assistance to help deliver adaptation measures. New products and services for resilience can attract new equity investments.

Panelists agree that the lack of data and metrics hinders investments in climate resilience.

As a conclusion, it can be summarized that the financing gap for adaptation can only be closed with the support of the private sector. Awareness Raising, risk assessment tools and metrics help to unlock the enormous potential of the private sector. A conductive policy framework is necessary taking the different nuances of the private sector into account.

DEMYSTIFYING ADAPTATION FINANCE FOR THE PRIVATE SECTOR:LAUNCH OF NEW STUDY AT COP22

Monday 07 November 2016, 3 pm // Blue Zone, Marrakesh, Morocco

What are the adaptation needs of private sector actors? How can adaptation be financed? What are the barriers that inhibit private adaptation finance flows? What is the appropriate role of public finance and policy to catalyse private financial flows towards adaptation?

These and other questions are discussed by a joint study between UNEP-FI and the German Federal Ministry for Economic Cooperation and Development (BMZ), implemented by the German Development Corporation (GIZ) and conducted by the Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, the German Development Centre (DIE) and Acclimatise. Second of a series of UNEP FI contributions to the multilateral negotiations on climate finance, the Green Climate Fund, and its Private Sector Facility.

The study examines why businesses find it difficult to adapt (e.g. access to finance, lack of information on expected climate change) and what governments and public finance institutions can do to support private sector investments.